In this article, we take a look at:
- Why you should consolidate your super
- Why superannuation goes missing
- Why it's good to choose your own super account – if you're allowed to
- When is super considered 'lost'
- How to consolidate super
Why you should consolidate your super
Having more than one superannuation account is rarely a good idea, unless you enjoy having a faceless fund manager fritter away your money. The main reason is that superannuation fund management fees in Australia are among the highest in the world – so the balance of each of your super accounts will be silently, and perhaps drastically, reduced over the years.
Fees can really take a toll in the long run. Roughly speaking, paying just 1% more each year can reduce the value of your super account by 20% over 30 years.
Even worse, small balances from short-term jobs can disappear altogether at the hands of ongoing fees, since protections against such a scenario (or 'member protection rules') were removed in July 2013.
That's a particular problem for young people with small accounts that don't see any contributions between jobs. Before they know it, their budding retirement savings can vanish in a haze of management fees.
Prior to the change, balances of $1000 or less were protected against such depredations and had been since 1995.
It makes much better financial sense, then, to pay one set of fees on a single account, and to keep those fees as low as possible.
Super gone missing
Another reason to stick with a single fund is that it's easy to lose track of how many super funds you have as you go from job to job. In late 2014, there was more than $14 billion gathering dust in 'lost' super accounts. Of that, about $6 billion was in limbo because the account holders neglected to update personal details such as a change of address or a new contact number.
The other $8 billion was deemed lost because the accounts in question hadn't received a contribution in five years or more. At the time these stats came out, more than 40% of super account holders had more than one account.
In June 2015, the ATO's official tally of lost super in a state-by-state breakdown was about $12.7 billion, though the tax office indicated the number could be even higher, as not all postcodes were captured.
From July 2013, lost super held by the ATO (as well as other unclaimed money) has earned tax-free interest based on the rate of inflation – all the more reason to make the effort to reclaim it.
Do I always get to choose my super account?
It's easy to end up with multiple accounts – and lose track of them – if your employer has the final say on which fund your super contributions (currently a minimum of 9.5% of your earnings) are paid into.
But in most circumstances, you can make the call. So don't let an employer foist a fund on you because it's more convenient for them.
That said, about seven out of ten Australian employees let their employers choose their funds for them – meaning your money ends up in what's called a default fund.
Letting your employer choose your fund and not taking it with you to the next job is one reason people have multiple accounts, and why so many super accounts go missing.
As the ATO points out, you can choose your own super if you are:
- employed under a federal or state award
- employed under an award or industrial agreement that doesn't require super contributions
- not employed under any state award or industrial agreement (including contractors who are regarded as eligible employees for super purposes).
That means most people can choose their own fund. But if you're sure not which award or agreement you're working under, ask your employer and then double check on the Fair Work Commission's website.
When is my super considered lost?
You super fund will report you to the ATO as a lost member if:
- they've tried but not been able to contact you
- they've not received any contributions or rollover amounts for you in the last five years
- your account was transferred from another fund as a lost member account and no new address has been found.
Super funds have to report and pay certain types of unclaimed super to the ATO twice a year, where the billions will languish until someone makes a legitimate claim.
The ATO may have your money if:
- your lost account has $4000 or less
- your lost account has been inactive for 12 months and the super fund can't identify the owner.
Otherwise your money is still with the super fund.
So how can you get it back? The ATO's SuperSeeker tool lets you look for lost super using your name, date of birth and tax file number.
(On a related note, money sitting in bank accounts is considered unclaimed if there's been no account activity for seven years. Up until 31 December 2015, the time limit was a considerably tighter three years. Unclaimed money goes to the Commonwealth of Australia Consolidated Revenue Fund, from which it can still be extracted by the rightful owner at any time.)
How do I consolidate my super?
If you know where your various super accounts are, it's not a big deal to consolidate them – though you will have to do a bit of research and think some things through.
The first step is deciding which super fund you want to be your one-and-only fund.
The top things to consider are:
- Which fund offers the type of insurance – generally death and disability insurance and income protection cover – that you need? Don't bail out of a fund that offers insurance you need and might not be able to get elsewhere.
- Does the fund (or funds) you want to bid farewell to impose exit fees? If so, they'll likely be offset by consolidating into a single super account with one set of fees, but it's good to know what to expect.
- Which fund is the best performer? This is tricky, but the general rule of thumb is to look for the best performance over a five-year timeframe, and bear in mind that most account balances will be affected by major sharemarket upheavals and the like. Two independent and well-established superannuation rating firms in Australia are Chant West and SuperRatings. Their rating methodologies vary – super is too complicated a product for a one-size-fits-all approach. But you can get a good sense of how your super fund has been performing, generally speaking, by looking at the rankings and the methodology behind them. It's pretty straightforward stuff once you spend some time on the rating websites.
- Which fund has the lowest fees? As we reported in an earlier story, annual fees can be as low as $300 or as high as $1245 on a $50,000 fund. High fees don't necessarily mean high performance, though there is sometimes a connection. And, of course, high performance can be offset by high fees. Ask your designated super fund about its fee structure. The rating services also provide information about fees, and ASIC provides a calculator that will show the effect fees will have over the long run.
- Finally, is your chosen fund one that your current employer can pay into? If so, be sure to inform your employer if you've chosen a new fund.
How to consolidate
- Find your fund membership numbers, which will be on any statement or communication you've received from the respective funds. If you can't find it but know the name of the fund, give them a call and explain your situation. Having your tax file number on hand will help prove your identity.
- Contact your chosen fund or visit their website and complete their superannuation rollover form and they'll take it from there. Some funds will also help you locate lost accounts, and you can also find rollover forms on the ATO's website.
- You can also consolidate your super by opening up a MyGov account, linking it to the ATO, and using its 'manage my super' tool – especially handy if you can't find account statements to identify your super funds.